February 16, 2016, by editor
The Belt and Road and Suez Canal: China-Egypt Relations Under Xi Jinping
Written by Shannon Tiezzi.
Sandwiched between his stops in Saudi Arabia and Iran, Chinese President Xi Jinping’s visit to Egypt was somewhat overlooked as part of his first trip to the Middle East. Yet the China-Egypt relationship will be one to watch carefully over the next decade. Like Saudi Arabia, Egypt is a traditional U.S. partner with which China is forging ever-deeper ties. Like Iran, Egypt is poised – and eager – to play a pivotal role on China’s “Belt and Road” initiative. In fact, thanks to the strategic importance of the Suez Canal, Egypt might wind up truly becoming China’s “gateway to Europe,” even more so than the Eastern European countries that have vied for the title.
Egypt has always been a pillar of China’s engagement with the Middle East, though the region as a whole has played a minor role in Beijing’s broader foreign policy agenda. This has been reflected in the travel schedules of Chinese leaders – Egypt is the only Middle Eastern country visited by Xi, Hu Jintao, and Jiang Zemin on each leader’s first trip to the region. China saw the logic of fostering good relations with Egypt, an important regional player and the home to Arab League headquarters.
Recently, however, events in both Egypt and China have provided a new strategic impetus for forging even deeper ties. On Egypt’s part, the ouster of longtime dictator Hosni Mubarak in 2011 changed Cairo’s political calculus. New President Mohammed Morsi was understandably suspicious of Egyptian overreliance on the United States, which had supported Mubarak for decades before calling for him to step down in the face of widespread protests. From the beginning, Morsi was inclined to pursue closer ties with China to counterbalance U.S. influence in his country; he chose Beijing as the site of his first official trip outside the Middle East.
Egypt’s interest in China ties remained strong even after Morsi himself was toppled by the Egyptian military in 2013. Human rights concerns tied to the coup and subsequent repression under President Abdel Fattah al-Sisi led the Obama administration to scale back military aid to Egypt; though flows of money and weapons have since been largely restored, the tensions remain. In this context, an increased partnership with China (which loudly trumpets its policy of noninterference in domestic affairs) was just as attractive to Sisi as it had been to Morsi. Sisi visited China in December 2014, and again in September 2015 to attend China’s military parade commemorating the 70th anniversary of the end of World War II.
For China, meanwhile, strategic interest in Egypt was also growing. Unlike China’s other Middle Eastern partners, ties with Egypt are not motivated by oil imports, but by a more geographic calculus. The Suez Canal has long been China’s primary shipping route for sending goods to Europe, China’s largest market. As a result, China has been eager to increase its presence in the crucial canal for decades – back in 2000, when then-President Jiang Zemin visited Egypt, he expressed China’s interest in “the development of Egypt’s Suez Gulf Special Economic Zone.” Chinese investment in the Suez Canal came in fits and starts for the next decade, but is poised to take off under Xi Jinping and his new “Belt and Road” initiative.
The “Belt and Road” envisions an integrated logistical and financial trading network that stretches from eastern China all the way to western Europe, spanning the entire Eurasian continent. The plan provides a strategic framework for China’s pre-existing interest in Egypt, and particularly in the Suez Canal. The Maritime Silk Road is envisioned as running from the Indian Ocean through the Red Sea and into the Mediterranean via the Suez Canal, making Egypt one of the few truly indispensable partners for turning the “Belt and Road” into a reality.
Accordingly, China’s investment in Egypt, and particularly in the special trade zone along the Suez Canal, has kicked into high gear since the “Belt and Road” was announced in 2013. The most ambitious plan calls for a drastic expansion of the China-Egypt Suez Economic and Trade Cooperation Zone – according to China Daily, the zone in its final form will cover 9.12 square kilometers and account for $2 trillion in investment, in fields from manufacturing to logistics to finance.
After Sisi’s state visit to China in December 2014, the two sides signed Memoranda of Understanding covering $10 billion in new Chinese investment (although only $1 billion had actually been realized as of August 2015). During Xi’s reciprocal visit this January, China pledged to provide $1.7 billion in financing for Egyptian banks and signed an additional $15 billion worth of deals for cooperation in “electricity, space, infrastructure, trade, energy, finance, culture, media, technology, and climate change,” according to Xinhua. Also in January, China and Egypt agreed to cooperate on the “Belt and Road” and signed a five-year outline to that end, calling for redoubled efforts to develop the China-Egypt Suez Economic and Trade Cooperation Zone.
For all the progress, however, Chinese investment might actually be moving too slowly for Egypt’s taste. Facing with stagnating economic growth (around 2 percent GDP growth in 2013 and 2014, according to the World Bank), Cairo has aggressively moved to court Chinese investment and trade. Egyptian Trade and Industry minister Mounir Fakhry Abdel Nour tried to sell China on its Suez Canal expansion project last September: “For a country like China, it would be great to have a logistic place to gather its exports before sending them to their final destinations… using a place like Suez area for such a project would a great chance for China.”
With both sides seeing clear benefits in expanding the relationship, China and Egypt are set to draw even closer together over the coming years. That increased cooperation is evident not only on the economic stage, but politically as well. Egypt has made a point of joining China’s pet multilateral projects, from the Asian Infrastructure Investment Bank (AIIB) to the 2014 Conference on Interaction and Confidence Building in Asia (CICA). Notably, both AIIB and CICA provide parallel – and potentially competing – frameworks to existing structures favored by the United States.
Meanwhile, China invited Sisi to join in the G20 summit in Hangzhou this September as one of two guests of honor – another sign of Beijing’s diplomatic interest in Cairo. That will mean another meeting – the fourth in less than two years – between Xi and Sisi, and more deals to cement the growth of the “Belt and Road” in Egypt.